Airline Industry’s Outlook Grows Darker by the Day

IATA’s updated analysis of how the COVID19 crisis
will impact airline passenger revenues suggests that a drop of
$314 billion in 2020, a 55% decline when compared to 2019, is now

On 24 March IATA estimated $252 billion in lost
revenues (-44% vs. 2019) in a scenario with severe travel
restrictions lasting three months.

The updated figure highlights the significant
deepening of the crisis since then, and reflects the following

– Severe domestic restrictions lasting three

– Some restrictions on international travel
extending beyond the initial three months; and

– Worldwide severe impact, including Africa and
Latin America (which had a small presence of the disease and were
expected to be less impacted in the March analysis).

Full-year passenger demand (domestic and
international) is expected to be down 48% compared to 2019.The two
main elements driving this are:

Overall Economic
: The world is heading for recession. The
economic shock of the COVID19 crisis is expected to be at its most
severe in Q2 when GDP is expected to shrink by 6% (by comparison,
GDP shrank by 2% at the height of the Global Financial Crisis).
Passenger demand closely follows GDP progression. The impact of
reduced economic activity in Q2 alone would result in an 8% fall
in passenger demand in the third quarter.

Travel Restrictions:
Travel restrictions will deepen the impact of recession on demand
for travel. The most severe impact is expected to be in Q2. As of
early April, the number of flights globally was down 80% compared
to 2019 in large part owing to severe travel restrictions imposed
by governments to fight the spread of the virus. Domestic markets
could still see the start of an upturn in demand beginning in the
third quarter in a first stage of lifting travel restrictions.
International markets, however, will be slower to resume as it
appears likely that governments will retain these travel
restrictions longer.

“The industry’s outlook grows darker by the day.
The scale of the crisis makes a sharp V-shaped recovery unlikely.
Realistically, it will be a U-shaped recovery with domestic travel
coming back faster than the international market. We could see
more than half of passenger revenues disappear. That would be a
$314 billion hit. Several governments have stepped up with new or
expanded financial relief measures but the situation remains
critical. Airlines could burn through $61 billion of cash reserves
in the second quarter alone. That puts at risk 25 million jobs
dependent on aviation. And without urgent relief, many airlines
will not survive to lead the economic recovery,” said Alexandre de
Juniac, IATA’s Director General and CEO.

Governments must include aviation in stabilization
packages. Airlines are at the core of a value chain that supports
some 65.5 million jobs worldwide. Each of the 2.7 million airline
jobs supports 24 more jobs in the economy.

“Financial relief for airlines today should be a
critical policy measure for governments. Supporting airlines will
keep vital supply chains working through the crisis. Every airline
job saved will keep 24 more people employed. And it will give
airlines a fighting chance of being viable businesses that are
ready to lead the recovery by connecting economies when the
pandemic is contained. If airlines are not ready, the economic
pain of COVID-19 will be unnecessarily prolonged,” said de Juniac.

IATA proposes a number of relief options for
governments to consider, including:

– Direct financial support to passenger and cargo
carriers to compensate for reduced revenues and liquidity
attributable to travel restrictions imposed as a result of

– Loans, loan guarantees and support for the
corporate bond market by governments or central banks. The
corporate bond market is a vital source of finance for airlines,
but the eligibility of corporate bonds for central bank support
needs to be extended and guaranteed by governments to provide
access for a wider range of companies;

– Tax relief: Rebates on payroll taxes paid to
date in 2020 and/or an extension of payment terms for the rest of
2020, along with a temporary waiver of ticket taxes and other
government-imposed levies.

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